Many pundits postulated about the impact of a second term for President Trump on myriad legal and regulatory issues. While we don’t do partisan political commentary at LaCorp, all of us in the credit union business must stay apprised of the impact of probably changes in policy on our business and the economy in general.
A Republican-led NCUA
First, the NCUA has a new chairman in Republican Vice Chair Kyle Hauptman. However, with two Democrats on the board, he’ll likely have difficulty moving forward items from the Trump Administration’s agenda. Despite controlling the agenda, he would still need a second vote to pass anything, which would require a lot of horse-trading.
Hauptman served as Senator Tom Cotton’s (R-Arkansas) adviser on economic policy, as well as Staff Director of the Senate Banking Committee’s Subcommittee on Economic Policy before joining the NCUA Board. He also, and possibly more importantly to this discussion, served on then-President-elect now-President Trump’s transition team in 2016. Hauptman had strong enough political ties to land the gig.
Many in credit unions see his ascension to the chairmanship as a boon because of his pro-business views and comprehension of the agency's and credit unions' technological needs.
His term ends in August 2025, unlike the other two board members, whose terms continue well beyond that. That said, the NCUA isn’t typically the first agency to receive attention from the incoming administration, and, technically, President Trump cannot replace NCUA board members mid-term. Former Chairman Harper indicated to the House Financial Services Committee his intention to remain on the board through the rest of his term through 2027; Board Member Tanya Otsuka’s term runs through 2029.
However, the NCUA’s recently approved budget increase was just 2.5% versus the proposed 12.5%. The agency’s budget proposal was posted on Oct. 30, ahead of the election. Perhaps the massive decrease was a cautionary move in light of the red landslide?
Chopra Out Soon at CFPB
We’ve experienced Consumer Financial Protection Bureau Director Rohit Chopra’s aggressive stance on ‘junk fees,’ which range from pay-for-services like overdrafts to credit card late fees. He’s pushed the limits – and some would say beyond, perhaps – of his authority. President Trump will be sending him packing soon.
Aside from his smaller government stance, the Trump Administration is expected to roll back many CFPB regulations finalized under Chopra. America’s Credit Unions and banking trade associations have filed suit in Mississippi over the recently finalized overdraft rule. When Trump comes into office, they’ll likely save a lot of time and money.
CFPB Might Not Be the Only Ones
Despite questions from the new administration’s high-profile members regarding consolidation of the FDIC into the Treasury, including President-elect Trump, there’s no mention of the NCUA. Was the NCUA intentionally left out of the discussion, or was it an oversight? The independent agency’s low profile is a double-edged sword, with credit unions caught between wanting to gain attention for their efforts and not making too many waves. However, Trump will launch the Department of Government Efficiency (DOGE) initiative with two CEOs, Elon Musk and Vivek Ramaswamy, rather than politicians heading the charge. While there’s plenty of pork to be ferreted out of the federal government’s budget, no doubt – and Trump has taken a posture of lowering taxes – the credit union federal income tax exemption could get caught up in DOGE’s proposed expense cuts, as well as potentially their federal regulator.
Credit Card Rate Caps Play Well on Both Sides of the Aisle
And don’t assume because the Republicans control, well, all of DC for the moment, that regulations are going to melt away anytime soon. Credit Union Times ran an article reminding readers that Trump himself mentioned something on the campaign trail about capping credit card interest rates, and a Republican senator admonished Visa and Mastercard for Americans’ crippling debt and leading a “collusive monopoly” before introducing legislation with a credit card interest rate cap of 18%. Federal credit unions are already capped at this rate, but if that came to fruition, so would everyone else, and we would have to ask, ‘How can credit unions stand out?’
Credit Union-Bank Buy Forecast
Mike Bell, partner and chair of the Financial Institutions Practice Group at Honigman, LLP, told CU Today that he expects the Trump administration could kick up more credit union-bank buys. The trend is at a record 20 bank-asset purchase deals year-to-date, with a couple more predicted by year-end. TDECU from Houston bought Sabine State Bank and Trust Co., right here in Louisiana, earlier this year.
Bell explained that as interest rates fall, which is the consensus of where they’re headed, subordinated debt and secondary capital become more affordable on the buy side. Lower rates will also help reduce the cost of funds for sellers. Additionally, Bell said he expects the bankers to back down from lobbying for an ‘exit fee’ for these agreements due to the administration’s deregulation stance.
The Trump Effect
Certainly, the Trump Administration will have many other impacts, possibly including declining interest rates and deregulation and a friendlier environment for crypto and blockchain-related projects. Additionally, according to the Bradley law firm, which serves financial services and other industries, all financial institutions should expect renewed activity on fair access to banking on Capitol Hill next year from a Republican-controlled administration and Congress.
At the same time, the Opportunity Finance Network has said it expects the Community Development Financial Institutions (CDFI) Fund to come under pressure with Trump’s promised debt reduction moves. We know that many credit unions here in Louisiana are CDFIs, so this initiative could have a significant impact.
During his first administration, President Trump proposed eliminating the CDFI Fund entirely. Ultimately, he signed $12 billion in CDFI investment into law as part of COVID relief measures, according to US News & World Report.
LaCorp will endeavor to keep you posted on the information that affects our credit unions as we continue to move forward in 2025.